My TSI colleague, Mike Burnick, continues to grow increasingly bullish on alternative energy this year and I’m firmly in that camp, too. Mike’s pretty bullish on infrastructure-related companies – many of whom are in the renewable energy industry and logging impressive earnings. I just recommended my first solar energy company in Commodity Trend Alert (CTA) recently following a massive plunge for the sector.
There’s no doubt that as oil prices head higher longer term in this century amid Peak Oil, more money will be diverted by governments and companies alike to clean-burning alternative sources of energy. That means solar, wind, geothermal and probably LNG or liquefied natural gas.
Unfortunately, alternative energy is also diverting food supplies to bio-diesel and ethanol production as crop shortages grow acute in 2008. The United Nations reports 33 countries are mired in food shortages and riots this spring following a massive 100% to 150% gain in coarse grain prices since 2007.
I’m reluctant to recommend a company that’s producing ethanol for two reasons; firstly, the majority of these companies can’t make a dime as corn prices skyrocket since 2006 and secondly, I have a problem plugging a stock that’s causing, even indirectly, a food crisis in the developing world. There’s something wrong with that picture.
That’s why I’m sticking to what works – both in terms of overall profits and my moral conscience.
Solar energy is a great theme. All you need is the sun, and presto, you have power! It doesn’t hurt anybody, it’s free and environmentally friendly.
In fact, I just plugged a solar energy company in my Ag-flation Tele-Conference Call last week – Suntech Power Holdings (NYSE-STP) following a massive 50% plunge. This stock soared more than 500% since its IPO a few years ago and along with the entire solar energy sector, starting correcting heavily starting last fall.
Solar energy is here to stay. The companies that manufacture solar panels are currently struggling to isolate silicon supplies – a primary input for production. I think production bottlenecks and flat earnings for the sector in 2008 is part of the reason why the sector crashed over the last five months. That’s when contrarians like me get interested.
Finally, I’ve got the government on my side with this investment theme.
Ethanol is heavily subsidized by the United States government. It doesn’t matter if these companies are losing billions as corn prices skyrocket since 2006. What matters is that it is extremely politically expedient to support ethanol.
Well, now solar energy is about to get a fatter government subsidy in 2008 on both sides of the Atlantic. Congress is expected to shortly pass a new round of subsidies for the solar energy industry, and if the government is on my side, I want to milk it for all it’s worth. Go green go, solar!
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